Too many Australians simply do not get it. It was not quantitative easing that put the US on a growth path and it was not a carbon tax that enabled America to be a world leader in carbon reduction.
What achieved both these outcomes was a new technology to produce low-cost oil and gas -- fracking. The availability of this low-cost energy cut the use of coal and attracted energy efficient manufacturing back to the US
In Australia we had the same opportunity but muffed it. However, we have achieved the third major benefit of fracking -- a great increase in the prosperity of farmers and more opportunity for the next generation to stay in the country rather than being forced to go to the cities for work.
In Queensland, there are close to 4,000 farmers with gas reserves under their land, who, unlike the US, are not entitled to an income from coal (or shale) seam gas generated by fracking technologies.
But, in practice, that’s not how it works. We have followed the US example and gas developers pay Queensland farmers. So those farmers with substantial gas reserves are receiving around $100,000 a year in cash, transforming the economics of their farms.
Because fracking has created new rural industries, many of their children now don’t need to go to Brisbane for work. If there is so-called ‘wet gas’ being extracted, the farm becomes drought proof.
The benefits are now clear, but they were certainly not clear two or three years ago when the gas development companies made every mistake in the book. They treated the farmers very badly and disrupted their farms.
The gas developers offered only token compensation and, in their haste to develop gas, sometimes used unsafe practices.
That complete “stuff up” gave enormous impetus to the anti-fracking movement in Australia. To make it worse, we got few of the other benefits that the US enjoyed.
The gas producers exported more gas via LNG than they had available, so they took gas from the Cooper that had been earmarked for Sydney.
There could now be gas shortages and huge price hikes that have the potential to curb economic growth and encourage Australia to use more coal to generate power.
And so the benefits of long-term economic stimulation and carbon reduction enjoyed by the US are not going to occur 'down under'. We have enjoyed a boost from LNG construction, but if oil prices stay low, then we will get minimal income tax benefits from these LNG plants.
Yesterday, I was at the Melbourne Press Club lunch with the American Ambassador John Berry. Berry was praising America’s carbon reduction and urging Australia to do likewise. His predecessors rarely mentioned carbon because the full implications of replacing coal with natural gas were not fully understood.
The CEO of the global Dow Chemical group, Australian-born Andrew Liveris, tried to explain modern energy dynamics to the old ALP government, but the Gillard government was besotted with its ridiculous carbon tax. The money raised from this tax was not even used for carbon reduction.
The current government’s direct action plan has a better chance of working, but Liveris is still telling us that what we need to do is develop our abundant coal, shale and natural gas US-style (Liveris: Australia should be a petrochemical power, August 19). That will involve fracking.
Of course, there are risks with fracking but the US has shown that properly managed they can be minimised. I suspect that deep down, there is a section of the Australian population that believes that as farmers have suffered from big fluctuations in fortunes for generations, they are thus a part of our national heritage and must not be changed.
Similarly, the children of farmers make great workers in the capital cities.
I jest, but there is a bizarre element of truth there. One of our real problems is that our government listens too much to a particular radio announcer.